 Hello, this is Gerard Leonhard, future list and CEO of the Futures Agency. We're having today a conversation about digital transformation with Simon Torrance from London and Rohit Talwar, also from London, both working with us on the various issues of digital transformation. First question we're going to discuss is what does it actually mean to have digital transformation? It's a very trendy word like social media was years ago and the next thing is artificial intelligence. What is digital transformation? Well, I suppose the pundits or the researchers these days will say it's about a fundamental change to the way you do business by leveraging new digital technologies and a potential enabler of growth, a new enabler of new growth. Okay, it's not like Mojo, like social media, cheap marketing, basically. No, it's not that. No, it's big data like the re-invention of how to make money. What is it? Well, inevitably there's a little bit of marketing hype in all of these things. But for me it's also the cultural mindset shift because you've got a clash of two planets. You've got the old world born physical who adopted digital technology but always saw it as a tool and were always constrained by how they saw physical problems in their heads. They're now clashing with the world born digital who see everything as software and algorithms and data and algorithms and see everything as being something you can tackle with a small piece of software. So it's that clash between those two worlds is playing out and it's how the old world really learns to become digital and embed it in every part of its organization and start to think in a way that actually you can do anything you want with digital technology. That's the big mindset shift that's coming from here. To me this transformation thing is interesting because I talked in the past a lot about companies change innovation, right? Now for me transformation is basically saying you're going to be somebody else, right? Now the car companies are becoming service providers, right? They're not actually changing only. They're actually going from a butterfly to vice versa, from the cocoon to the butterfly. So that's actually transformation and the painful part is even five years your revenues are 50% from new revenue streams, which is the case for many companies now. How do you find them? Yeah, well I guess I mean you have to think about what markets are you, do you have some capability or what capabilities and assets do you have? What markets might be interested in those? And then how do you reconfigure what you've got and address those market opportunities? So as you say, the connected car is a prime example. Well, car companies are not going to be just selling you the car. They're going to be selling you a subscription service to insurance, which is paid for based on how you drive. You've not just sort of just your age bracket and it'll sell you content and it'll sell you all kinds of other goods to help you manage your journey or make your journey a more pleasant experience. You know, one of our colleagues, Yuri Fanges, just wrote this book, co-wrote the book, The Exponential Organization, we discussed a lot when we were together in Doha. And that is part of the transformation that I see is that all of a sudden the life of companies isn't linear anymore. It's becoming very exponential, which means either up or completely down, moving very quickly. So what are the things that we need? What is the chemistry we need in those companies to actually do that? I think we've got to be very careful with the hype around exponential organisations. It's a very, very small portion of companies that can demonstrate some sort of exponential growth, whether it's the number of patents they're issuing or how quickly they can bring a product to market. 99.999% of companies out there are not exponential in their thinking, in their behaviour. And the challenge right now is about starting to learn what digital makes possible, how it enables you to completely rethink the way you deliver something. So for example, in the car industry, you know, Ford would tell you that there's five to six thousand components in an average car. It takes you three to five years to develop a new model, along come the new players who are putting less than 50 components in the car because they're 3D printing them. And they're totally changing the thinking about how many prototypes you can build, how quickly you can develop a new model, all of which is enabled by digital thinking. And it's that mindset shift that you have to get your organisation to get its head round if you're going to embrace digital technology. And then you can start to see the areas in your organisation where you can get truly exponential growth. There's a good example, actually. There's an organisation called Quirky. It's a sort of community of inventors. And in the old world, in the linear world, you can come up with product ideas and you go to make, speak to your R&D department or your marketing department and you might speak to a few suppliers. And that's a very small world that you're really operating within. But this organisation called Quirky, you call Quirky. You put out the area that you'd like some new ideas on new products developed. And Quirky, this external crowd that you've never met and you don't know how they operate, can take an idea for a consumer package good from idea to the shelf in a shop in 29 days. 29 days. The individual organisation takes 290 days, typically, to do something like that. I think this is a good example for what I understand for the exponential organisation. It's not exponential growth, exponential process, I think, yeah. It's capability, suddenly. It's discovery, exponential discovery. Let's close this session with two pieces of advice for each of us. So if you're looking at transforming because of the digital economy and what it means, what are the two things you need in a company? The two top things you need? Yeah, well, I think my view would be you need to properly understand what you mean by digital. So it's the CEO and it's the board. The board tend to be made of old men who have got their particular interests in managing a company. They and the CEO need to understand what digital means for them. It's not just sales and marketing. It is something quite fundamental. So that's the starting point, education, understanding. And then it's creating a, I guess it's the right or starting to create the right culture and approach to testing and iterating the application of digital technologies and new, I suppose, digital innovation approaches. OK, I'd actually turn it on its head like 180 degrees and start with your customer and start with an understanding of what's coming at your customer from other sectors in terms of the way they can get to goods and services, how they're paying for them, and really understand what's shaping the imagination of your customers going forward. Because if you only stick within your own framework, you tend to limit yourself to what you've seen in the past. Opening up to holding new ways of paying for things, holding new ways of buying is the first. And doing it through the eyes of your customers is key. The second is, think about your entire value chain. Look at what you used to consider as being your domain versus the domain of your suppliers or your channels to market. And really look at it as an ecosystem now and start to understand how the new digital solutions cut right across that ecosystem, eliminating a lot of the old barriers. Take local motors, 3D printing cars, they've eliminated all the component suppliers in that and they're going direct to market with the products that are eliminating the dealerships. So firstly, understand how your consumer behavior is changing. Secondly, understand how the overall value change is being transformed by digital. And then start to think about all the options for us in the way the game is changing. Very good point. I was going to say the same thing, basically. I mean, be your customer, right? That's kind of a, you know, you wouldn't believe how many companies I've worked with don't actually, they want to swim, but they don't want to get wet. So they're simulating the experience, but they're not actually all of the experience. So they have no emotional connection to what actually happens, right? They're looking from the outside as the record label looks at the music fan, that same thing, I didn't work, won't work. And so, and the second question is that that I find when people talk about this, you have to think about if you are digitally contestable with whatever you're doing, that will it have a digital component that can contest the way you're doing it and some other component. For example, now also for us, now there is lots of resources. And in fact, there's the first robot who's going to speak at a tech conference. Okay. So are you digitally contestable? This is an important question. If you're honest, you can look at them, you say, yes, this is where I'm contestable and then you have to do something. So that's my cup of tea. So we have Simon Torrens, we have Rohit Talvar, Gerard Leonhard, you can find out more at thefuturesagency.com. Thanks for tuning in.